Zillow Earnings 2019-06-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________________

FORM 10-Q

_____________________________________________________



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-36853

_____________________________________________________

ZILLOW GROUP, INC.

(Exact name of registrant as specified in its charter)

_____________________________________________________



Washington		47-1645716
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1301 Second Avenue, Floor 31,

Seattle, Washington 98101

(Address of principal executive offices) (Zip Code)

(206) 470-7000

@ZillowGroup

(Registrant’s telephone number, including area code)

_____________________________________________________

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share	ZG	The Nasdaq Global Select Market
Class C Capital Stock, par value $0.0001 per share	Z	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 31, 2019, 58,486,480 shares of Class A common stock, 6,217,447 shares of Class B common stock, and 141,903,904 shares of Class C capital stock were outstanding.

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ZILLOW GROUP, INC.

Quarterly Report on Form 10-Q

For the Three Months Ended June 30, 2019

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As used in this Quarterly Report on Form 10-Q, the terms “Zillow Group,” “the Company,” “we,” “us” and “our” refer to Zillow Group, Inc., unless the context indicates otherwise.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including Part I, Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations), contains forward-looking statements based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include all statements that are not historical facts and generally may be identified by terms such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” or the negative or plural of these words or similar expressions.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those risks, uncertainties and assumptions described in Part I, Item 1A (Risk Factors) in our Annual Report on Form 10-K for the year ended December 31, 2018. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements, and we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations.

WHERE YOU CAN FIND MORE INFORMATION

Our filings with the Securities and Exchange Commission, or SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports are available on our website at www.zillowgroup.com, free of charge, as soon as reasonably practicable after the electronic filing of these reports with the SEC. The information contained on our website is not a part of this quarterly report on Form 10-Q or any other document we file with the SEC.

Investors and others should note that Zillow Group announces material financial information to its investors using its press releases, SEC filings and public conference calls and webcasts. Zillow Group intends to also use the following channels as a means of disclosing information about Zillow Group, its services and other matters and for complying with its disclosure obligations under Regulation FD:


•	Zillow Group Investor Relations Webpage (http://investors.zillowgroup.com)


•	Zillow Group Investor Relations Blog (http://www.zillowgroup.com/ir-blog)


•	Zillow Group Twitter Account (https://twitter.com/zillowgroup)

The information Zillow Group posts through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following Zillow Group’s press releases, SEC filings and public conference calls and webcasts. This list may be updated from time to time. The information we post through these channels is not a part of this quarterly report on Form 10-Q or any other document we file with the SEC, and the inclusion of our website addresses and Twitter account are as inactive textual references only.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data, unaudited)



	June 30, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	766,698		$	651,058
Short-term investments	673,029			903,867
Accounts receivable, net of allowance for doubtful accounts of $4,809 and $4,838 at June 30, 2019 and December 31, 2018, respectively	82,261			66,083
Mortgage loans held for sale	38,653			35,409
Inventory	552,823			162,829
Prepaid expenses and other current assets	62,062			61,067
Restricted cash	43,882			12,385
Total current assets	2,219,408			1,892,698
Contract cost assets	46,271			45,819
Property and equipment, net	145,932			135,172
Right of use assets	210,080			—
Goodwill	1,984,907			1,984,907
Intangible assets, net	202,824			215,904
Other assets	16,498			16,616
Total assets	$	4,825,920		$	4,291,116
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	8,028		$	7,471
Accrued expenses and other current liabilities	68,520			63,101
Accrued compensation and benefits	32,001			31,388
Revolving credit facilities	409,799			116,700
Warehouse lines of credit	30,057			33,018
Deferred revenue	37,080			34,080
Deferred rent, current portion	—			1,740
Lease liabilities, current portion	18,794			—
Total current liabilities	604,279			287,498
Deferred rent, net of current portion	—			19,945
Lease liabilities, net of current portion	211,593			—
Long-term debt	716,819			699,020
Deferred tax liabilities and other long-term liabilities	15,123			17,474
Total liabilities	1,547,814			1,023,937
Commitments and contingencies (Note 17)
Shareholders’ equity:
Preferred stock, $0.0001 par value; 30,000,000 shares authorized; no shares issued and outstanding	—			—
Class A common stock, $0.0001 par value; 1,245,000,000 shares authorized; 58,474,815 and 58,051,448 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively	6			6
Class B common stock, $0.0001 par value; 15,000,000 shares authorized; 6,217,447 shares issued and outstanding as of June 30, 2019 and December 31, 2018	1			1
Class C capital stock, $0.0001 par value; 600,000,000 shares authorized; 141,821,374 and 139,635,370 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively	14			14
Additional paid-in capital	4,088,470			3,939,842
Accumulated other comprehensive income (loss)	896			(905		)
Accumulated deficit	(811,281		)	(671,779		)
Total shareholders’ equity	3,278,106			3,267,179
Total liabilities and shareholders’ equity	$	4,825,920		$	4,291,116

See accompanying notes to condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data, unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenue:
IMT	$	323,669		$	305,941		$	621,941		$	586,797
Homes	248,924			—			377,396			—
Mortgages	26,985			19,305			54,345			38,328
Total revenue	599,578			325,246			1,053,682			625,125
Cost of revenue (exclusive of amortization) (1):
IMT	26,059			24,290			50,310			46,884
Homes	240,732			—			363,151			86
Mortgages	4,430			1,237			9,108			2,476
Total cost of revenue	271,221			25,527			422,569			49,446
Sales and marketing	187,433			147,727			349,020			285,018
Technology and development	120,330			100,376			228,100			194,309
General and administrative	82,839			60,579			178,613			116,652
Acquisition-related costs	—			632			—			659
Integration costs	293			—			645			—
Total costs and expenses	662,116			334,841			1,178,947			646,084
Loss from operations	(62,538		)	(9,595		)	(125,265		)	(20,959		)
Other income	9,458			3,089			18,626			5,535
Interest expense	(18,897		)	(7,187		)	(35,363		)	(14,260		)
Loss before income taxes	(71,977		)	(13,693		)	(142,002		)	(29,684		)
Income tax benefit	—			10,600			2,500			8,000
Net loss	$	(71,977	)	$	(3,093	)	$	(139,502	)	$	(21,684	)
Net loss per share — basic and diluted	$	(0.35	)	$	(0.02	)	$	(0.68	)	$	(0.11	)
Weighted-average shares outstanding — basic and diluted	205,754			194,155			205,137			192,807
____________________ (1) Amortization of website development costs and intangible assets included in technology and development	$	14,656		$	21,020		$	29,056		$	43,569

See accompanying notes to condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands, unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net loss	$	(71,977	)	$	(3,093	)	$	(139,502	)	$	(21,684	)
Other comprehensive income (loss):
Unrealized gains (losses) on investments	751			223			1,895			(109		)
Currency translation adjustments	(52		)	(44		)	(94		)	(66		)
Total other comprehensive income (loss)	699			179			1,801			(175		)
Comprehensive loss	$	(71,278	)	$	(2,914	)	$	(137,701	)	$	(21,859	)

See accompanying notes to condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except share data, unaudited)



	Class A Common Stock, Class B Common Stock and Class C Capital Stock				Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income		Total Shareholders’ Equity

	Shares		Amount
Balance at April 1, 2019	205,130,332		$	21	$	4,022,218		$	(739,304	)	$	197	$	3,283,132
Issuance of common and capital stock upon exercise of stock options	814,062		—		19,433			—			—		19,433
Vesting of restricted stock units	569,260		—		—			—			—		—
Shares and value of restricted stock units withheld for tax liability	(18	)	—		(1		)	—			—		(1		)
Share-based compensation expense	—		—		46,820			—			—		46,820
Net loss	—		—		—			(71,977		)	—		(71,977		)
Other comprehensive income	—		—		—			—			699		699
Balance at June 30, 2019	206,513,636		$	21	$	4,088,470		$	(811,281	)	$	896	$	3,278,106



	Class A Common Stock, Class B Common Stock and Class C Capital Stock				Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity

	Shares		Amount
Balance at April 1, 2018	192,944,326		$	20	$	3,340,387		$	(570,512	)	$	(1,454	)	$	2,768,441
Issuance of common and capital stock upon exercise of stock options	2,065,545		—		46,747			—			—			46,747
Vesting of restricted stock units	439,944		—		—			—			—			—
Shares and value of restricted stock units withheld for tax liability	(711	)	—		(37		)	—			—			(37		)
Share-based compensation expense	—		—		41,444			—			—			41,444
Net loss	—		—		—			(3,093		)	—			(3,093		)
Other comprehensive income	—		—		—			—			179			179
Balance at June 30, 2018	195,449,104		$	20	$	3,428,541		$	(573,605	)	$	(1,275	)	$	2,853,681

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	Class A Common Stock, Class B Common Stock and Class C Capital Stock				Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity

	Shares		Amount
Balance at January 1, 2019	203,904,265		$	21	$	3,939,842		$	(671,779	)	$	(905	)	$	3,267,179
Issuance of common and capital stock upon exercise of stock options	1,543,850		—		32,997			—			—			32,997
Vesting of restricted stock units	1,065,607		—		—			—			—			—
Shares and value of restricted stock units withheld for tax liability	(86	)	—		(3		)	—			—			(3		)
Share-based compensation expense	—		—		115,634			—			—			115,634
Net loss	—		—		—			(139,502		)	—			(139,502		)
Other comprehensive income	—		—		—			—			1,801			1,801
Balance at June 30, 2019	206,513,636		$	21	$	4,088,470		$	(811,281	)	$	896		$	3,278,106



	Class A Common Stock, Class B Common Stock and Class C Capital Stock				Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity

	Shares		Amount
Balance at January 1, 2018	190,115,148		$	20	$	3,254,146		$	(592,243	)	$	(1,100	)	$	2,660,823
Cumulative-effect adjustment from adoption of guidance on revenue from contracts with customers	—		—		—			40,322			—			40,322
Issuance of common and capital stock upon exercise of stock options	4,479,759		—		99,653			—			—			99,653
Vesting of restricted stock units	834,788		—		—			—			—			—
Shares and value of restricted stock units withheld for tax liability	(1,318	)	—		(65		)	—			—			(65		)
Share-based compensation expense	—		—		74,307			—			—			74,307
Portion of conversion recorded in additional paid-in-capital in connection with partial conversion of convertible notes maturing in 2020	20,727		—		500			—			—			500
Net loss	—		—		—			(21,684		)	—			(21,684		)
Other comprehensive loss	—		—		—			—			(175		)	(175		)
Balance at June 30, 2018	195,449,104		$	20	$	3,428,541		$	(573,605	)	$	(1,275	)	$	2,853,681

See accompanying notes to condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)



	Six Months Ended June 30,
	2019			2018
Operating activities
Net loss	$	(139,502	)	$	(21,684	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	41,728			52,926
Share-based compensation expense	109,756			69,684
Amortization of right of use assets	10,572			—
Amortization of contract cost assets	17,880			18,309
Amortization of discount and issuance costs on convertible notes maturing in 2023 and 2021	17,799			9,504
Deferred income taxes	(2,500		)	(8,000		)
Loss on disposal of property and equipment	3,878			2,106
Bad debt expense	706			(352		)
Deferred rent	—			(2,845		)
Accretion of bond discount	(3,695		)	(504		)
Changes in operating assets and liabilities:
Accounts receivable	(16,884		)	(9,335		)
Mortgage loans held for sale	(3,244		)	—
Inventory	(389,994		)	(5,666		)
Prepaid expenses and other assets	(2,015		)	(14,697		)
Lease liabilities	(11,946		)	—
Contract cost assets	(18,332		)	(21,371		)
Accounts payable	1,256			1,855
Accrued expenses and other current liabilities	6,952			(5,189		)
Accrued compensation and benefits	613			4,309
Deferred revenue	3,000			4,002
Other long-term liabilities	149			—
Net cash provided by (used in) operating activities	(373,823		)	73,052
Investing activities
Proceeds from maturities of investments	539,312			172,573
Purchases of investments	(302,891		)	(230,276		)
Purchases of property and equipment	(29,672		)	(31,212		)
Purchases of intangible assets	(8,927		)	(4,777		)
Net cash provided by (used in) investing activities	197,822			(93,692		)
Financing activities
Proceeds from borrowing on revolving credit facilities	293,099			—
Net repayments on warehouse lines of credit	(2,961		)	—
Proceeds from exercise of stock options	32,997			99,656
Value of equity awards withheld for tax liability	3			(66		)
Net cash provided by financing activities	323,138			99,590
Net increase in cash, cash equivalents and restricted cash during period	147,137			78,950
Cash, cash equivalents and restricted cash at beginning of period	663,443			352,095
Cash, cash equivalents and restricted cash at end of period	$	810,580		$	431,045
Supplemental disclosures of cash flow information
Cash paid for interest	$	16,616		$	4,733
Noncash transactions:
Capitalized share-based compensation	$	5,878		$	4,623
Write-off of fully depreciated property and equipment	$	9,867		$	13,293
Write-off of fully amortized intangible assets	$	3,311		$	10,797

See accompanying notes to condensed consolidated financial statements.

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ZILLOW GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Organization and Description of Business

Zillow Group, Inc. houses one of the largest portfolios of real estate brands on mobile and the web. Zillow Group is committed to leveraging its proprietary data, technology and innovations to make home buying, selling, financing and renting a seamless, on-demand experience for consumers. As its flagship brand, Zillow now offers a fully integrated home shopping experience that includes access to for sale and rental listings, Zillow Offers, which provides a new, hassle-free way to buy and sell homes directly through Zillow, and Zillow Home Loans, Zillow’s affiliated lender that provides an easy way to receive mortgage pre-approvals and financing. Other consumer brands include Trulia, StreetEasy, HotPads, Naked Apartments, RealEstate.com and Out East. In addition, Zillow Group provides a comprehensive suite of marketing software and technology solutions to help real estate professionals maximize business opportunities and connect with millions of consumers. Zillow Group also operates a number of business brands for real estate, rental and mortgage professionals, including Mortech, dotloop, Bridge Interactive and New Home Feed. Zillow, Inc. was incorporated as a Washington corporation in December 2004, and we launched the initial version of our website, Zillow.com, in February 2006. Zillow Group, Inc. was incorporated as a Washington corporation in July 2014 in connection with our acquisition of Trulia, Inc. (“Trulia”). Upon the closing of the Trulia acquisition in February 2015, each of Zillow, Inc. and Trulia became wholly owned subsidiaries of Zillow Group.

Certain Significant Risks and Uncertainties

We operate in a dynamic industry and, accordingly, can be affected by a variety of factors. For example, we believe that changes in any of the following areas could have a significant negative effect on us in terms of our future financial position, results of operations or cash flows: rates of revenue growth; our ability to manage advertising inventory or pricing; engagement and usage of our products; our investment of resources to pursue strategies that may not prove effective; competition in our market; the stability of the residential real estate market and the impact of interest rate changes; changes in government regulation affecting our business; outcomes of legal proceedings; natural disasters and catastrophic events; scaling and adaptation of existing technology and network infrastructure; management of our growth; our ability to attract and retain qualified employees and key personnel; our ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments; protection of customers’ information and other privacy concerns; protection of our brand and intellectual property; and intellectual property infringement and other claims, among other things.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements include Zillow Group, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. These condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and accompanying notes included in Zillow Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the SEC on February 21, 2019. The condensed consolidated balance sheet as of December 31, 2018, included herein, was derived from the audited financial statements of Zillow Group, Inc. as of that date.

The unaudited condensed consolidated interim financial statements, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our financial position as of June 30, 2019, our results of operations, comprehensive loss and shareholders’ equity for the three and six month periods ended June 30, 2019 and 2018, and our cash flows for the six month periods ended June 30, 2019 and 2018. The results of the three and six month periods ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or for any interim period or for any other future year.

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Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. On an ongoing basis, we evaluate our estimates, including those related to the net realizable value of inventory, amortization period and recoverability of contract cost assets, website and software development costs, recoverability of long-lived assets and intangible assets with definite lives, share-based compensation, income taxes, business combinations, and the recoverability of goodwill and indefinite-lived intangible assets, among others. To the extent there are material differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected.

Recently Issued Accounting Standards Not Yet Adopted

In August 2018, the Financial Accounting Standards Board (“FASB”) issued guidance related to a customer’s accounting for implementation costs incurred in hosting arrangements. The guidance aligns the requirements for capitalizing implementation costs incurred in cloud computing arrangements with the requirements for capitalizing costs to develop or obtain internal-use software. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. This guidance may be applied either retrospectively or prospectively. We expect to adopt this guidance on January 1, 2020. We have not yet determined the impact the adoption of this guidance will have on our financial position, results of operations or cash flows.

In August 2018, the FASB issued guidance related to disclosure requirements for fair value measurements. This guidance removes, modifies and adds disclosures related to fair value measurements. This guidance is effective for interim and annual periods beginning after December 15, 2019, and early adoption is permitted. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim and annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. We expect to adopt this guidance on January 1, 2020. We have not yet determined the impact the adoption of this guidance will have on our financial statement disclosures.

In June 2016, and subsequently amended in April 2019 and May 2019, the FASB issued guidance on the measurement of credit losses on financial instruments. This guidance will require an entity to measure credit losses for certain financial instruments and financial assets, including trade receivables. This guidance requires an entity to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument on initial recognition and at each reporting period. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. The adoption of this guidance requires a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We expect to adopt this guidance on January 1, 2020. We have not yet determined the impact the adoption of this guidance will have on our financial position, results of operations or cash flows.

Note 3. Fair Value Measurements

Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The standards also establish a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:


•	Level 1—Quoted prices in active markets for identical assets or liabilities.


•	Level 2—Assets and liabilities valued based on observable market data for similar instruments, such as quoted prices for similar assets or liabilities.


•	Level 3—Unobservable inputs that are supported by little or no market activity; instruments valued based on the best available data, some of which is internally developed, and considers risk premiums that a market participant would require.

We applied the following methods and assumptions in estimating our fair value measurements:

Cash equivalents — The fair value measurement of money market funds is based on quoted market prices in active markets. The fair value measurement of commercial paper is based on observable market-based inputs or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Table of Contents

Short-term investments — The fair value measurement of our short-term investments is based on observable market-based inputs or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Restricted cash — Restricted cash consists of cash received from the resale of homes through Zillow Offers which may be used to repay amounts borrowed on our revolving credit facilities (see Note 13) and amounts held in escrow related to funding home purchases in our mortgage origination business. The carrying value of restricted cash approximates fair value due to the short period of time amounts borrowed on the revolving credit facilities are outstanding.

Mortgage loans held for sale — The fair value of mortgage loans held for sale is generally calculated by reference to quoted prices in secondary markets for commitments to sell mortgage loans with similar characteristics.

Interest rate lock commitments — The fair value of interest rate lock commitments (“IRLCs”) is calculated by reference to quoted prices in secondary markets for commitments to sell mortgage loans with similar characteristics. Expired commitments are excluded from the fair value measurement. We generally only issue IRLCs for products that meet specific purchaser guidelines. Since not all IRLCs will become closed loans, we adjust our fair value measurements for the estimated amount of IRLCs that will not close.

Forward contracts — The fair value of mandatory loan sales commitments and derivative instruments such as forward sales of mortgage-backed securities that are utilized as hedging instruments are calculated by reference to quoted prices for similar assets.

The following tables present the balances of assets and liabilities measured at fair value on a recurring basis, by level within the fair value hierarchy, as of the dates presented (in thousands):



	June 30, 2019
	Total			Level 1		Level 2
Cash equivalents:
Money market funds	$	641,436		$	641,436	$	—
Short-term investments:
U.S. government agency securities	446,736			—		446,736
Corporate notes and bonds	94,922			—		94,922
Commercial paper	87,062			—		87,062
Municipal securities	33,352			—		33,352
Foreign government securities	5,997			—		5,997
Certificates of deposit	1,481			—		1,481
Treasury bills	3,479			—		3,479
Mortgage origination-related:
Mortgage loans held for sale	38,653			—		38,653
IRLCs	1,186			—		1,186
Forward contracts - other current assets	32			—		32
Forward contracts - other current liabilities	(225		)	—		(225		)
Total	$	1,354,111		$	641,436	$	712,675

Table of Contents



	December 31, 2018
	Total		Level 1		Level 2
Cash equivalents:
Money market funds	$	541,575	$	541,575	$	—
Commercial paper	3,999		—		3,999
Short-term investments:
U.S. government agency securities	646,496		—

Price	29.53	EPS	-1
Shares	207	P/E	-30
MCap	6,113	P/FCF	-9
Net Debt	-920	EBIT	-208
TEV	5,193	TEV/EBIT	-25
TTM 2019-09-30, in MM, except price, ratios

10-K	2020-12-31	Filed 2021-02-12
10-Q	2020-09-30	Filed 2020-11-05
10-Q	2020-06-30	Filed 2020-08-06
10-Q	2020-03-31	Filed 2020-05-07
10-K	2019-12-31	Filed 2020-02-19
10-Q	2019-09-30	Filed 2019-11-07
10-Q	2019-06-30	Filed 2019-08-07
10-Q	2019-03-31	Filed 2019-05-09
10-K	2018-12-31	Filed 2019-02-21
10-Q	2018-09-30	Filed 2018-11-06
10-Q	2018-06-30	Filed 2018-08-06
10-Q	2018-03-31	Filed 2018-05-08
10-K	2017-12-31	Filed 2018-02-15
10-Q	2017-09-30	Filed 2017-11-07
10-Q	2017-06-30	Filed 2017-08-08
10-Q	2017-03-31	Filed 2017-05-04
10-K	2016-12-31	Filed 2017-02-07
10-Q	2016-09-30	Filed 2016-11-02
10-Q	2016-06-30	Filed 2016-08-05
10-Q	2016-03-31	Filed 2016-05-04
10-K	2015-12-31	Filed 2016-02-12
10-Q	2015-09-30	Filed 2015-11-05
10-Q	2015-06-30	Filed 2015-08-05
10-Q	2015-03-31	Filed 2015-05-12

EX-31.1	q22019form10-qex311.htm
EX-31.2	q22019form10-qex312.htm
EX-32.1	q22019form10-qex321.htm
EX-32.2	q22019form10-qex322.htm



		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Loss	4
	Condensed Consolidated Statements of Shareholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4.	Controls and Procedures	49

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 6.	Exhibits	53

	Signatures	54

8-K	2020-11-05
8-K	2020-10-11
8-K	2020-09-17
8-K	2020-08-06
8-K	2020-06-09
8-K	2020-06-02
8-K	2020-05-15
8-K	2020-05-12
8-K	2020-05-07
8-K	2020-04-06
8-K	2020-03-23
8-K	2020-03-23
8-K	2020-03-17
8-K	2020-02-19
8-K	2019-11-18
8-K	2019-11-07
8-K	2019-10-04
8-K	2019-09-04
8-K	2019-09-04
8-K	2019-09-03
8-K	2019-08-07
8-K	2019-06-04
8-K	2019-05-09
8-K	2019-05-03
8-K	2019-04-23
8-K	2019-02-21
8-K	2018-11-13
8-K	2018-11-06
8-K	2018-10-31
8-K	2018-10-16
8-K	2018-08-03
8-K	2018-08-02
8-K	2018-06-28
8-K	2018-06-28
8-K	2018-06-25
8-K	2018-05-31
8-K	2018-05-03
8-K	2018-04-12
8-K	2018-02-08

Z 10Q Quarterly Report

Zillow Earnings 2019-06-30